The GSTR-3B for the month of September, 2020 is going to be a critical GST return in regard to Input Tax Credit. This is on account of two reasons, first being that any input tax credit pertaining to last fiscal viz FY 2019-20 can be availed in this return only and if not availed , it shall lapse. The second reason for importance of GSTR-3B is that cumulative application of restriction of the input tax credit under Rule 36(4) of the CGST Rules, 2017 for the period February to August,2020 is required to be made in said return.
Let us deliberate upon both the above aspects and how to ensure that there is no credit loss nor we avail any excess credit.
1. Last opportunity to avail ITC for FY 2019-20:
The time limit of availing of input tax credit is prescribed under Section 16(4) of the CGST Act, 2017 which reads as under:
(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.
From above provision it emerges as under:
- Input tax credit in respect of:
- any invoice issued in FY 2019-20 or a debit note related to any invoice which was issued in FY 2019-20
- cannot be availed after
- due date of furnishing of return u/s 39 (GSTR-3B) for September,2020 or furnishing of annual return for FY 2019-20 whichever, is earlier.
As we are currently engaged in filing of annual return of FY 2018-19, question of furnishing annual return of 2019-20 does not arise, accordingly the deadline for availing of ITC for FY 2019-20 is due date of filing of GSTR-3B for September, 2020 i.e. 20th October, 2020 (22nd or 24th October for small taxpayers). For details refer to GST Compliance Calendar for October,2020.
Thus it should be ensured that taxpayers must reconcile Input Tax Credit (ITC) for FY 2019-20 claimed in GSTR-3B with GSTR-2A and book of accounts (purchase records). The taxpayer should also recheck the availing / non-availing of credit in light of provisions of blocked credit contained in Section 17(5) of the CGST Act. With above exercise they can identify and claim any missed out ITC or reverse the excess credit claims before filing GSTR-3B of September,2020 on or by 20th October.
It may also be noted that compliance of payment of GST under reverse charge should be checked thoroughly for FY 2019-20 and if any missed case is found the tax thereon be paid in GSTR-3B of September,2020 , self invoice be issued (if such supply was received from unregistered supplier) and ITC thereof should also be availed in GSTR-3B of September,2020 itself (if other requirement are fulfilled) as otherwise such credit would also become time barred. For details Click here.
2. Application of ITC restriction under Rule 36(4) of the CGST Rules, 2017:
While availing the input tax credit in GSTR-3B it should be ensured that Rule 36(4) of the CGST Rules,2017 is not breached.
As per per said Rule, which is effective from 9th October,2019, in order to ensure that suppliers file their GSTR-1 on timely basis, ITC restriction @ 20% (of the eligible credit invoices appearing in GSTR-2A) in regard to invoices not appearing in GSTR-2A has been mandated. It may be noted that said restriction was later reduced to 10% of the eligible credits from 1st January,2020. Thus we have three different rules in regard to ITC availment during currency of FY 2019-20 which are tabulated below:
| Period | Remarks |
| 1st April to 8th October 2019 | Taxpayers were allowed to claim ITC in their GSTR-3B on a provisional basis (whether credit appearing in GSTR-2A or not) without restricting the upper limit. |
| 9th October to 31st December,2019 | 20% restriction was imposed on provisional credits every month based on eligible ITC in GSTR-2A. |
| 1st January to 31st March, 2020 | 10% restriction was imposed on provisional credits every month based on eligible ITC in GSTR-2A. |
Apart from above, due to relief from the pandemic, the ITC restriction of Rule 36(4) was suspended between February 2020 to August 2020 and accordingly the taxpayers were allowed to avail full ITC on provisional basis without any restriction. However, above relief was with rider that the restriction under Rule 36(4) should be applied by taxpayers cumulatively for the months viz Feb to August, 2020 in its GSTR-3B for the month of September,2020.
Thus we can say that GSTR-3B of September,2020 is most critical not only in regard to availing of ITC of FY 2019-20 (application of cumulative ITC restriction for months Feb and March, 2020) but also for FY 2020-21 in regard to the months April to August,2020.
For understanding how to apply Rule 36(4) cumulatively in GSTR-3B of September,2020 Click here.
2.1 CBIC Clarification on cumulative restriction under Rule 36(4):
CBIC has also issued Circular No. F. No. CBIC / 20 / 06/14/2020-GST dated 09.10.2020 for providing clarification relating to application of rule 36(4) of the CGST Rules, 2017 for the months of Feb to August, 2020 wherein it has clarified as under:
- All the taxpayers are advised to ascertain the details of invoices uploaded by their suppliers in GSTR-1 for the periods of February, March, April, May, June, July and August, 2020, till the due date of furnishing of the statement in FORM GSTR-1 for the month of September, 2020 (i.e. 11.10.2020) as reflected in GSTR-2As.
- Taxpayers shall reconcile the ITC availed in their FORM GSTR-3Bs for the period February, 2020 to August, 2020 with the details of invoices uploaded by their suppliers of the said months, till the due date of furnishing FORM GSTR-1 for the month of September, 2020. The cumulative amount of ITC availed for the said months in FORM GSTR-3B should not exceed 110% of the cumulative value of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers in their GSTR-1, till the due date of furnishing of the statements in FORM GSTR-1 for the month of September, 2020.
- Availability of 110% of the cumulative value of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers in GSTR-1 does not mean that the total credit can exceed the tax amount as reflected in the total invoices for the supplies received by the taxpayer i.e. the maximum credit available in terms of provisions of section 16 of the CGST Act.
- The excess ITC availed arising out of reconciliation during this period, if any, shall be required to be reversed in Table 4(B)(2) of FORM GSTR-3B, for the month of September, 2020. Failure to reverse such excess availed ITC on account of cumulative application of sub-rule (4) of rule 36 of the CGST Rules would be treated as availment of ineligible ITC during the month of September, 2020.
- While applying restriction the restriction under Rule 36(4) would be computed cumulatively for period Feb to August, 2020 and the restriction for month of September, 2020 shall be computed separately.
3. Concluding remarks:
From above deliberations it is evident that GSTR-3B for the month of September,2020 is to be filed cautiously in order to avoid any credit loss or availing of any excess credit. The exercise to be be done by taxpayer in this regard will be:
- Reconciling the books with GSTR-3B for ITC availed for the period till 08.10.2019 (entry in books). It should be ensured that credit of any eligible invoice is not missed nor any blocked credit has been availed.
- Reconciling the ITC (availed from 09.10.2019 to 31.03.2020) as per books , GSTR-3B and GSTR-2A (downloaded for these months on 11.10.2020). Here also it should be ensured that credit of any eligible invoice is not missed (as otherwise the credit will lapse) nor any blocked credit has been availed. The important point to note here is that we should first quantify the eligible credits appearing in GSTR-2A and compare with books / GSTR-3B. If less credit is appearing in GSTR-2A , the maximum amount in respect of invoices whose credit is not appearing in GSTR-2A would be 20% of eligible credit (10% from 01.01.2020) appearing in said form.
- Reconciling the ITC (availed from April to September,2020) as per books , GSTR-3B and GSTR-2A (downloaded for these months on 11.10.2020). Here also we should first quantify the eligible credits appearing in GSTR-2A and compare with books / GSTR-3B. If less credit is appearing in GSTR-2A , the maximum amount in respect of invoices whose credit is not appearing in GSTR-2A would be 10% of eligible credits appearing in said form.
Above exercise is of utmost importance before filing GSTR-3B for September,2020 as any failure to reverse any excess availed ITC on account of cumulative application of rule 36(4) of the CGST Rules would be treated as availment of ineligible ITC during the month of September, 2020 and thus interest will have to be paid.
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CA. Mohammad Salim is an ICAI award winning Chartered Accountant having rich experience of more than 20 years in the field of indirect taxes. He is the Member, Indirect Taxes Committee of PHD Chamber of Commerce and Industry. He is author of four successful books on GST published by Taxmann Publication and is also GST expert on taxmann portal.
